Letters to the Editor
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Long Term Interest Rates for Dummies
I feel relatively less stupid than I felt yesterday, because Alan Greenspan shares my mystification about why long term interest rates have not risen. (You my recall that I ask that question at least once per month, here in HTWW.)
So... Here's my new question: Are we going into a new, horrid round of 1970s/80s-style Stagflation, but without the compensation of high interest returns? Argh!
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Liar Liar economy on fire
Alan Greenspan is a liar, plain and simple. He knew exactly where the cheap money policy of the Fed would lead. As the ever brilliant Krugman wrote a while back, Greenspan had actually written years before describing exactly the kind of housing bubble cheap money would create.
The housing bubble was created by unusually low rates combined with almost no regulation. This was needed to create a false boom to pay for the Wars and the tax cuts. It was known it would cause a crash. However the culprits believed they would be out of town and living high on the hog by the time that happened. Greenspan heads the list of culprits. Add to that the shell game he played with Social Security and tax cuts and there is no question that he is the greatest white collar criminal ever. But these days the big crimes, war crimes, torture, looting the treasury, corruption, human rights abuses, election theft all go unpunished. Jail is just for the little people.
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Is he mad?
Greenspan is full of shit. We bought our first house 4 years ago this month, Dec. 2003. Our first was a fixed-rate mortgage, but the second (20% of purchase price) was adjustable. It was fine for the first month, but this also coincided with near monthly rise in the Fed's rate. That meant that our ARM second went up monthly. This state of affairs continued until Sept. 04 when we refinanced the second to a fixed-rate. Had we stayed with the ARM, our monthly payments would have gone even higher.
How does that help consumers? What planet is Greenspan on?
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ARMS not the problem
ARMs aren't the problem, even though greedy bankers are part of the problem I know plenty of people who smartly chose ARMs over fixed rates, and saved alot of money doing so.
The problem is that too many lenders qualified borrowers who couldn't afford to borrow as much as they did. The low interest rates on the ARMS allowed the mortgage peddlers to justify the loans to mortgage underwriters who were asleep at the wheel.
Greenspan is right to sing the praises of different mortgage products as they can allow consumers to save money. We shouldn't be criticizing the products, but the mortgage lenders - even as they are now burned by their own greed to lend ever more money.
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Greedy Lenders????
Capitalism is greed - if you don't like it become a Socialist - that’s fine. Just don't expect a Capitalist enterprise to behave like mother Theresa. Capitalism is about making as much money as possible as quickly as possible. If you pass out cheap money and you don't regulate how it is distributed then you get exactly what you got. It has nothing to do with the ethics or morals of the lenders. If one Lender had refused to do these loans then someone else would have done them and the non "greedy" Lender would have gone out of business. The Lenders are only to blame if they broke the law. It is not their job to act like moral guardians. That’s the job of our elected leaders. FDR understood this. Lenders like any other Capitalist can legitimately push right up to the boundary of the laws. The people to blame are the ones who made cheap credit available and provided no regulation of how it was to be used. Stop scapegoating the mortgage profession, the blame should be directed at Bush and Greenspan.
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The Real Estate investing crowd...
deserves some crap shoveled there way as well. I've been boring my friends to tears at parties explaining that it's just plain impossible to have housing prices rising at double-digit rates every year for a long period of time when incomes were stagnant or barely rising. There's only so much current and future income that households can plow into housing! It doesn't take a genius to realize that if everyone is spending 10% more a year on housing, but no one is making any more income, we have a situation that can only last for 3 or 4 years. Especially with housing already being a huge portion of people's consumption.
With everyone buying and selling property back and forth to each other at massive increases in "value," it was only a matter of time until the music stopped and people were left without a chair. It's just like the predictions a decade ago about dot com firms growing at 20% a year forever... sorry guys, economics just doesn't work like that.
All very reminiscent of a Modest Mouse song, Bankrupt on Selling
So all of the businessers in their unlimited hell
Where they buy and they sell and they sell all their trash
To each other, but they're sick of it all
And they're bankrupt on selling
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So... let me get this straight.
When George W. Bush blew through our budget surplus, decreased our income (taxes) and put our spending through the roof (war in Iraq) and began borrowing huge amounts of money from a predatory lender (China)... that was OK?
If I was to spend every cent of my savings, have my income cut, increase my credit card debt to the point where I'm borrowing to make the minimum payments, Mr. Greenspan would call me a fool, and he would be correct.
So, why did he tell all of us who were angry with George W. Bush's disasterous mishandling of our economy "Move along, folks. Nothing to see here. Nothing to worry about"?
Alan Greenspan turned on his respected past to become another tool of the Bush Organized Crime Family. His credibility is nonexistant. His word means nothing.
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Where is Greenspan's error again?
I don't understand this drive to scapegoat Greenspan, unless it's issuing from a general liberal antithesis to anyone who is agressively free-market.
America isn't the only country which experienced a real estate bubble. It has happened all over the western world. That, along with interest rate insensitivity to the Fed's tightening moves, does point to global forces at work.
Also, ARM's are a great idea. I have one myself and it has saved me tens of thousands of dollars in mortgage interest over the fixed-rate alternative. The problem that arose was from reckless lending standards, enabled by a separation of lender from ownership of the debt. Greenspan is hardly to blame for that.
This article was just entirely irrational -- like the worst of of the dreck I see in the MSM. It started with a thesis and then cherry picked and slanted whatever it could find to try to support it. I subscribe to Salon because I expect better than this.